IPR 5 IPRs Market Data Control, Monitor & Reporting in The Cloud Age

What happens in an era when data control is mandated to the n’th degree, yet disintermediation is rampant?

With the dramatic shift in how data is being disseminated managing IPRs has just become harder in the practical sense. Existing processes are not likely to prove sufficient, and management mindset has not shifted to meet the challenge. We take a look at the challenges ahead.

Old Hearts, New Challenges

At the heart of any business model with a licence system as its core is the ability to ensure exact usage is paid for, not less, not more, exact. This is especially true for electronic information and data distribution.

It is important to understand how the process functions, and that there are all too many ways it can, and usually will, breakdown.

While ‘honesty statements’ for reporting still exist, with Bloomberg’s B-Pipe being a prime example, this manual trust in reporting is inadequate to meet the sheer avalanche of market data usage.

The result is the need for systems and process in situ which are acceptable to, and approved by, the exchanges, sources, their distributors and subscribers.

The mantra is ‘Control, Monitor, Report’. Then the sources and vendors tack on ‘Police’.

There has been an evolution from single tasking in information and data to multi-tasking which has led to the development of a twin track approach, (1) in Systems Management, and (2) in Process Management.

Both are inextricably connected, and poor management in one is always reflected in, or results in, bad management in the other.

Yet one should always take priority over the other. Good process management will deliver systems management, yet good systems management is dependent upon good process management.

Too many financial institutions and their vendors put the cart before the horse, just as I have done in the diagram below.

Three Quick Points for Compliance

Understand your suppliers’ licences and policies.

Institute effective data governance policies and processes.

Have the tools for the job (Oh, and use them).

Best Practice Management in the Future

Understanding the basics of licences is a powerful aid to good data governance and a simpler life for administrators.

However, the requirement for data usage reporting and licences is not the same. Herein lies the trap as the management of data is forced to adapt with data usage changes.

While we are currently at a plateau regarding data usage, i.e. applications, terminals, personal electronic devices, what is currently evolving is the dynamic of how the end users access the market data required.

For instance, Terminals, once closed environments, now have greater connectivity, but still tend to be viewed in individual isolation. This makes them relatively easy to control, monitor, and report.

Moving up in complexity comes network and enterprise usage. An interlinked and inter-dependent environment where market data is shared, re-distributed and used in multiple applications.

This means data sources are able to expand the reach of their licences which increases the level of effort and process required to manage market data services to ensure compliance, and avoid potentially large dollar liabilities.

It is has become difficult enough to control, monitor, and report data usage at the Macro Level, it is becoming next to impossible at the micro level. Fortunately, many exchanges have recognised this, but probably more because unrealistic licence policies and fee structures are impossible to enforce.

Okay that is hyperbole, but we really are about to take a quantum jump into a future where data control is mandated yet disintermediation is rampant.

It gets harder to control, monitor, report, as inter-connectivity increases in an expanding user universe. Therefore, the step from managing market data in a mono-directional enterprise universe to an omni-directional multi-verse is truly challenging, and potentially daunting task.

The Cloud is also attracting new players who do not understand, nor much care for, the existing market data licence structure that requires the current levels of controls, monitor, and reporting. They see these as irrelevant business barriers, ignoring that the existing system for all its many faults does function and provide the financial world with the information investors base their decisions upon.

These new players much prefer, a more dystopian ‘uberised’ world, and will eventually make impacts forcing change, but at what point and to what extent?

Perhaps a returning King Canute would come up with an appropriate metaphor.